(2018-03-02) Manta, Alexandra; Athens University of Economics and Business, Department of Economics; Zacharias, Eleftherios; Louri - Dendrinou, Eleni; Gatsios, Konstantinos
Predatory pricing is a strategy that is adopted by firms that hold a dominant position in the market. Although there is no precise definition of it, it is considered a practice in which the dominant firm charges abusively low prices, which are below cost for a specific period of time, and suffers short-term losses. The reason, of course, of this deliberate disclaimer of profits is because the dominant firm wishes to exclude its competitors from the market and to strengthen its market position in the long-run. These competitors may already exist in the market or they may be potential competitors. When its competitors are excluded from the market, the dominant firm will be able to set a price to its products close enough to the monopoly price and replenish or increase its profits.
